G20 Agreed on a New Rule for Global Minimum Corporate Tax

According to Reuters, Leaders of the world’s 20 largest economies have backed an agreement on a minimum global corporate tax that aims to eliminate tax evasion of big businesses.

The Minimum Corporate Tax Transaction is a coordination agreement under which large corporations will face a minimum of 15 % tax from 2023. As a result, large businesses will no longer be able to hide profits and evade taxes in offshore establishments.

“The fact that we agreed on this new international tax system is good news for all of us, it’s clearly a revolution in the international tax system,” said the French finance minister, Bruno Le Maire, on Friday as officials arrived in Rome.

US internet giants such as Amazon, Google parent Alphabet, Facebook, and Apple – which have benefited from basing themselves in low-tax countries to minimize their tax bills – are particular targets of the new global regulation.

The reform, brokered by the OECD and backed by 136 countries representing more than 90% of world GDP, has long been in the making and is supposed to come into effect in 2023, but the deadline is at risk of slipping.

Each country taking part in the global deal must first pass national legislation – and US president Joe Biden is among those facing tough domestic opposition to the plan.

Nevertheless, the G20 calls on relevant working groups within the OECD and G20 “to swiftly develop the model rules and multilateral instruments … with a view to ensure that the new rules will come into effect at a global level in 2023.”

Leading countries at the summit also discussed the distribution of vaccines in poorer countries. G20 leaders backed calls for debt relief for impoverished countries and promised that by mid-2022, 70% of the world’s population would have already been vaccinated against COVID-19.

Finally, G20 leaders pledged to “remain vigilant to the global challenges that impacting our economies, such as disruptions in supply chains, monitor and address these issues as our economies recover.”